Six indicted in $10 million mortgage fraud scheme

A federal grand jury has indicted six people, including a Chicago gang leader, in a $10 million mortgage fraud scheme involving eight properties, seven on the South Side, officials announced today.

The gang leader, Deangelo McMahan, who previously has faced federal drug charges, was the subject of a 2005 Chicago Tribune article, part of a larger series on the effects of mortgage fraud on Chicago neighborhoods and suburbs.

Those indicted face federal mail, bank or wire fraud charges.

McMahan, 36, of Hazel Crest, and Fred Haywood, 37, of Chicago, initially were indicted in December. Four new defendants were added to the case and McMahan was indicted on an additional bank fraud charge in an indictment returned Wednesday.

The indictment seeks the forfeiture of almost $2.4 million to repay losses by mortgage companies that were victimized in the scheme.

In the scheme, those charged arranged for people with good credit to buy homes they could not afford and which they usually did not intend to live in, according to the indictment. The defendants received more than $10 million in mortgage loans by using false loan applications, authorities said.

In some cases, McMahan and the others received more than $200,000 from homes loans involved in the scheme, according to the indictment. The indictment details eight residential properties, seven on the South Side, that were involved in mortgage schemes from 2002 through 2007, after the Tribune wrote about McMahan's involvement in questionable mortgages.

After the loans were received they would go unpaid, according to the indictment. The defendants also funneled money they obtained by falsely inflating appraisals to sham businesses they controlled, according to a release from U.S. Atty. Patrick Fitzgerald's office.

Arrest warrants have been issued for McKenzie and Carl McMahan, who ran a business that purported to rehabiltate homes. All those alleged to be part of the scheme will face arraignment later. Deangelo and Haywood are free on bond in the December indictment, authorities said.

The 2005 Tribune article detailed how McMahan, by then a licensed loan officer who had been a leader of the Insane Mafia Vice Lords, helped arrange questionable loans on several properties, including one of those mentioned in today's indictment.